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Burberry posts Q4 comparable sales growth driven by Asia Pacific and Americas

By Prachi Singh

13 May 2021

Burberry’s retail sales declined 9 percent at both CER and reported exchange rates, while wholesale declined 17 percent at CER and reported exchange rates in the year with a good recovery in the second half. In total, the group saw revenue down 10 percent at CER and 11 percent at reported exchange rates to 2,344 million pounds. Comparable store sales grew 32 percent in the fourth quarter, down 5 percent against Q4 FY19 as the company began to anniversary the impact from the pandemic and with a sequential acceleration in sales in Asia Pacific and Americas whilst EMEIA remained impacted by lockdowns.

The company said in a release that group adjusted operating profit fell 8 percent at CER, with a strong recovery in H2 rising by 48 percent following the 71 percent decline in H1. Gross margin increased in the year by 270bps CER and 260bps reported. Reported operating profit increased 176 percent. The company has reinstated full year dividend at FY19 levels of 42.5p on the back of strong cash generation.

“In the last three years we have transformed our business and built a new Burberry, anchored firmly in luxury. In spite of Covid-19, we achieved our objectives for the period and delivered a strong set of results in FY21, ending the year with good full-price sales growth,” said Marco Gobbetti, Burberry’s chief executive officer.

Review of Burberry’s Q4 and full year performance

The company’s comparable store sales declined 9 percent, while Burberry said, underlying performance was strong with full-price sales growth of 7 percent offset by store closures and a significant reduction in tourist traffic due to Covid-19, together with the planned reduction in markdown activity in the second half of the year.

Asia Pacific sales grew by 18 percent, led by Mainland China and Korea. Mainland China saw strong double-digit growth with comparable store sales accelerating in the fourth quarter to 53 percent against FY19 driven by the Lunar New Year campaign.

Korea also delivered double-digit percentage growth with a significant improvement in comparable store sales in the last quarter of the year. South Asia Pacific (SAP) declined by a double-digit percentage, affected by limited tourist traffic and airport store closures. Japan also fell, impacted by a lack of international travel, while EMEIA fell by 44 percent year on year.

The company added that continental Europe saw a decline broadly in line with the regional average; however, local spend returned to growth from the second quarter. The UK remained challenged with London performance weak given high tourist exposure. Middle East returned to growth in the second half of the year.

Americas saw a robust performance in full-price sales from Q2 FY21, increasing 17 percent in the year.

Burberry reports full-price sales growth across product categories

The company further said that product performance was impacted by the pandemic with a shift towards casualisation and evergreen items, outerwear was driven by strong performance in coats and jackets, quilts and downs with exceptional performance in Mainland China and Korea.

Within Ready-to-wear, tops and bottoms continued to outperform. Leather goods remained a key focus in FY21 with the new bag pillars performing well.

Digital full-price sales saw high double digit percentage growth across all categories with a particularly strong performance in accessories driven by leather goods and shoes.

In FY21, the company opened 17 stores and closed 23 stores. Key openings included 13 in Mainland China including the first social retail store in Shenzhen Bay.

Licensing revenue fell 19 percent at reported exchange rates due to lower sales from the Covid-19 fallout.

Burberry expects to post high single digit CAGR

Taking FY20 as the base year, Burberry expects revenue to grow at a high single digit percentage compound annual growth rate at FY21 CER in the medium term underpinned by the continued outperformance of full-price sales.

The company plans to continue to strengthen brand equity by exiting markdowns in mainline stores in FY22, which the company said is a headwind against the comparable store sales growth amounting to a mid-single digit percentage in the full year.

Burberry added that in FY22 adjusted operating margin progression will be impacted by operating expense normalisation and increased investment to accelerate growth, with more meaningful margin accretion thereafter.